Management team

Strategy and process

A wide range of securities: Unlike funds tied to a narrow investment universe, this fund can invest across global fixed-income sectors and can adjust the mix of securities as opportunities change.

Progressive risk management: The fund pursues absolute return using modern investment tools to help mitigate risk and potentially outperform general markets during flat or negative periods.

Ultimate flexibility: The fund goes beyond the constraints of a traditional benchmark, investing dynamically worldwide to pursue positive results over three years or more.

Fund manager commentary

More volatility likely in the bond market

Bill Kohli, Co-Head of Fixed Income, discusses market liquidity and explains why he expects to see more volatility in the bond market.

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. To obtain the most recent month-end performance, visit putnam.com.

Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and Putnam Absolute Return 500 Fund and 700 Fund, and 4.00% and 3.25% for income funds (1.00% and 0.75% for Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and 300 Fund, and Putnam Short-Term Municipal Income Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and 300 Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, R, T, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Performance for Class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A, M, and T shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Objective

The fund seeks to earn a positive total return that exceeds the return on U.S. Treasury bills by 300 basis points (or 3.00%) on an annualized basis over a reasonable period of time (generally at least three years or more) regardless of market conditions.

Annual performance as of 12/31/14

2009

2010

2011

2012

2013

2014

Before sales charge

8.23%

3.10%

-4.37%

5.63%

4.35%

1.53%

BofA Merrill Lynch U.S. Treasury Bill Index

0.29%

0.21%

0.14%

0.12%

0.09%

0.06%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. To obtain the most recent month-end performance, visit putnam.com.

Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and Putnam Absolute Return 500 Fund and 700 Fund, and 4.00% and 3.25% for income funds (1.00% and 0.75% for Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and 300 Fund, and Putnam Short-Term Municipal Income Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and 300 Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, R, T, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Performance for Class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A, M, and T shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Performance snapshot

Before sales charge

After sales charge

1 mt.

1.37
%

0.35
%

as of 02/28/15

YTD

0.68
%

-0.33
%

as of 03/02/15

Morningstar ratings as of 01/31/15

Nontraditional Bond

Rating

Number of funds in category

Overall

2

(219)

3 yrs.

3

(219)

5 yrs.

2

(103)

Distributions

Record/Ex dividend date

12/19/14

Payable date

12/23/14

Income

$0.371

Extra income

--

Short-term cap. gain

--

Long-term cap. gain

--

Volatility as of
01/31/15

Standard deviation (3 yrs.)

2.13%

Lipper rankings are based on total return without sales charge
relative to all share classes of funds with similar objectives as
determined by Lipper. Past performance is not indicative of future
results.

For each fund with at least a three-year history, Morningstar
calculates a Morningstar Rating based on a Morningstar Risk-Adjusted
Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and
redemption fees), placing more emphasis on downward variations and
rewarding consistent performance. The top 10% of funds in each
category receive 5 stars, the next 22.5% receive 4 stars, the next 35%
receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10%
receive 1 star. (Each share class is counted as a fraction of one fund
within this scale and rated separately, which may cause slight
variations in the distribution percentages.) The Overall Morningstar
Rating for a fund is derived from a weighted average of the
performance figures associated with its 3-, 5-, and 10-year (if
applicable) Morningstar Rating metrics. Data is historical. Past
performance is no guarantee of future results.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is
calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio
is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the
manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.

The BofA Merrill Lynch U.S. Treasury Bill Index is an unmanaged index that tracks the performance of U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market. Qualifying securities must have a remaining term of at least one month to final maturity and a minimum amount outstanding of $1 billion. It is not possible to invest directly in an index.

Each fund seeks to earn a positive total return that exceeds the rate of inflation by a targeted amount over a reasonable period of time regardless of market conditions. There can be no assurance that a fund will meet its objective. The fund is not intended to outperform stocks and bonds during strong market rallies. Consult your financial advisor to determine which fund fits into your investment goals and time horizon.

Consider these risks before investing: Allocation of assets among asset classes may hurt performance. Bond prices in the portfolio may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer or industry. The fund's active trading strategy may lose money or not earn a return sufficient to cover associated trading and other costs. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk and the risk that they may increase in value less when interest rates decline and decline in value more when interest rates rise. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The fund may not achieve its goal, and it is not intended to be a complete investment program. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.

The fund's efforts to produce lower-volatility returns may not be successful and may periodically make it more difficult for the fund to achieve its targeted return. Under certain market conditions, the fund may accept greater-than-typical volatility to seek its targeted return. You can lose money by investing in the fund. The fund's prospectus lists additional risks.

Allocations may not total 100% of net assets because the table includes the notional value of derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities.

Credit qualities are shown as a percentage of net assets as of the date indicated above. A bond rated BBB or higher (A-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor's, Moody's and Fitch. Short-term cash bonds are included in their closest long-term equivalent rating category. To be announced (TBA) mortgage commitments, if any, are included based on their issuer ratings. Ratings and portfolio credit quality will vary over time. Derivative instruments, including currency forwards, are only included to the extent of any unrealized gain or loss on such instruments and are shown in the not-rated category. Cash is also shown in the not-rated category. Derivative offset values are included in the not-rated category and may result in negative weights. The fund itself has not been rated by an independent rating agency.

You can lose money by investing in a fund. Any given fund may not achieve its goal, and is not intended as a complete investment program. All funds have risk. The
value and/or returns of a portfolio will fluctuate with market conditions. You may have more or less than the original amount invested when you redeem your shares.

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Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial representative, call Putnam at 1-888-4-PUTNAM (1-888-478-8626), or click on the prospectus section to view or download a prospectus. Please read the prospectus carefully before investing.